2014 Earnings Guidance Presentation December 6, 2013
Safe Harbor Statement Statements made in this presentation that relate to future events of PNM Resources’ (“PNMR”), Public Service Company of New Mexico’s (“PNM”), or Texas - New Mexico Power Company’s (“TNMP”) (collectively, the “Company”) expectations, projections, estimates, intentions, goals, targets, and strategies are made pursuant to the Private Securities Litigation Reform Act of 1995. Readers are cautioned that all forward-looking statements are based upon current expectations and estimates. PNMR, PNM, and TNMP assume no obligation to update this information. Because actual results may differ materially from those expressed or implied by these forward- looking statements, PNMR, PNM, and TNMP caution readers not to place undue reliance on these statements. PNMR's, PNM's, and TNMP's business, financial condition, cash flow, and operating results are influenced by many factors, which are often beyond their control, that can cause actual results to differ from those expressed or implied by the forward-looking statements. For a discussion of risk factors and other important factors affecting forward- looking statements, please see the Company’s Form 10 -K and 10-Q filings with the Securities and Exchange Commission, which factors are specifically incorporated by reference herein. Non-GAAP Financial Measures For an explanation of the non-GAAP financial measures that appear on certain slides in this presentation (ongoing earnings, ongoing earnings per diluted share, and ongoing EBITDA), as well as a reconciliation to GAAP measures, please refer to the Company’s website as follows: http://www.pnmresources.com/investors/results.cfm. 2
Opening Remarks & Overview Pat Vincent-Collawn Chairman, President and CEO
2014 Ongoing Guidance and Dividend Increase Remain on track for 10 – 13% total return by 2016 Guidance Midpoint Guidance $1.47 Midpoint $1.31 $1.38 2012 2013E 2014E 2014 Ongoing Guidance $1.42 - $1.52 o 6% growth over 2013 (1) Dividend increased 12% to $0.74 o Achieves a 50% payout ratio (2) (1) Assumes midpoints of guidance ranges (2) Assumes mid-point of 2014 guidance range 4
Texas Economic Conditions TNMP Consumers and Retail Energy Sales (1) Energy Sales Consumers Employment growth continues in Texas 300,000 7,000 6,000 250,000 Employment Growth Rates Energy Sales, GWh 5,000 Total Consumers 200,000 (12 month moving average) 4.0% 4,000 150,000 3,000 100,000 2.0% 2,000 50,000 1,000 0.0% 2007 2008 2009 2010 2011 2012 2013 0 - Oct -2.0% Sales growth at TNMP driven by the strong Texas economy -4.0% Texas Houston Metro Dallas Metro 2014 load projection 1% - 3% (2) 2014 expected customer growth 1% (1) Excludes Transmission Service end-users 5 (2) Weather-normalized
New Mexico Economic Conditions PNM Customers and Retail Energy Sales (1) Energy Sales Customers Albuquerque Metro rolling 12 month 600,000 employment growth in positive territory 10,000 Total Customers 500,000 Energy Sales, GWh 8,000 Employment Growth Rates (12 month moving average) 400,000 2.0% 6,000 300,000 4,000 0.0% 2007 2008 2009 2010 2011 2012 2013 200,000 Oct 2,000 -2.0% 100,000 - -4.0% Modest customer growth at PNM offset by declining energy sales -6.0% 2014 load projection (1%) - 0% (2) New Mexico Albuquerque Metro 2014 expected customer growth 0.5% (1) Excludes Economy Service customers 6 (2) Weather-normalized
NMPRC BART Filing PNM’s BART Filing will be submitted to the NMPRC in December and will address: • Retirement of San Juan Units 2 and 3 and recovery of undepreciated investments ($205M) • Installation of SNCR technology on San Juan Units 1 and 4 ($82M) • CCNs for Palo Verde Unit 3 and at least 78 MW of San Juan Unit 4 • Proposed replacement power: 177 MW gas peaker ($189M) and 40 MW solar facility ($87M) BART Filing Timeline Dec. Q1 2014 2013 2015 Filing Submitted to NMPRC NMPRC Review Period (9 months) NMPRC Extension Period (6 months) Potential Settlement Timeframe 7
2014 Guidance Chuck Eldred Executive Vice President and CFO
Consolidated Guidance (Ongoing) 2013 Guidance Range (1) $1.35 Consolidated EPS $1.41 2014 Guidance Range $1.42 Consolidated EPS $1.52 PNM TNMP Corp/Other $1.15 - $1.21 $0.38 - $0.40 ($0.11) – ($0.09) (1) Guidance range originally $1.32 - $1.42. Narrowed to $1.35 - $1.41 on November 1, 2013. 9
PNM Guidance (Ongoing) PNM EPS $1.15 - $1.21 $1.15 - $1.18 $1.14 2012 2013E 2014E Year-over-Year 2013E – 2014E Key Performance Drivers ∆ EPS Renewable rider $0.03 Palo Verde Unit 3 $0.03 Delta Person Generation Station $0.02 AFUDC $0.01 - $0.02 FERC Generation Gallup contract $0.01 - $0.02 FERC Transmission rate relief $0.01 PV3 Nuclear Decommissioning Trust $0.00 - $0.02 Outage costs ($0.01) 2013 Weather ($0.02) Load ($0.05) - $0.00 Depreciation and property tax ($0.05) - ($0.04) 10
TNMP Guidance (Ongoing) TNMP EPS $0.38 - $0.40 $0.33 - $0.35 $0.33 2012 2013E 2014E Year-over-Year 2013E – 2014E Key Performance Drivers ∆ EPS TCOS rate relief $0.04 Load $0.01 - $0.03 2013 Weather $0.01 Depreciation and property tax ($0.03) - ($0.02) 11
Future Earnings Growth Drivers 2015 2016 PNM Renewable rider rate increase January PV1 half-priced lease payments, $16.5M annual January lease reduction (until next general rate case) Rate increase — would include potential purchase January of PV2 leases, renewables and SNCR equipment TNMP TCOS rate increase Twice / year Twice / year Corporate/Other Retirement of $120M holding company 9¼% debt May 12
Rate Base Growth 2014 – 2018 Total Capital Plan: $2.1B PNM Rate Base CAGR: 5 - 7% TNMP Rate Base CAGR: 5 - 7% Total Capital Spending (In millions) $524 $511 $14 $18 $443 $76 $14 $130 $86 $94 $330 $49 $302 $14 $72 $14 $136 $88 $154 $106 $71 $65 $263 $213 $201 $195 $189 $180 $166 $159 $157 $117 2014 2015 2016 2017 2018 PNM Generation PNM T&D PNM Renewables TNMP Other Depreciation Amounts may not add due to rounding 13
Strong Dividend Growth The annual common stock dividend raised Dividend rate: by 12% in December 2013 to $0.74 per $0.74 (1) share Payout ratio: Long-term target: 50% - 60% payout ratio 50% (2) • Expect above industry average dividend Dividend yield: growth while staying in the target payout ratio 3.2% (3) range The Board will continue to evaluate the dividend on an annual basis, considering: $0.74 $0.66 $0.58 • Sustainability and growth $0.50 • Capital planning Feb'11 Feb'12 Feb'13 Dec'13 • Industry standards Next dividend review in December 2014 (1) Indicated annual rate (2) Assumes mid-point of the 2014 guidance range (3) Based on 12/03/13 stock price of $22.96 14
2014 Strategic Goals and Objectives Earn authorized returns Regulatory Success Operational Excellence Customer Satisfaction Cost Control Deliver top Strengthen quartile total credit ratings returns 15
Questions & Answers
Appendix
PNM Assumptions 2014 Assumptions amounts shown are before tax 2014 Weather - (1%) to 0% Load 1% = $0.05 Palo Verde Unit 3 sales price ($/MWh) ~$37 O&M increase - Outage costs $15M PV3 NDT gains $6M - $9M Tax rate 36.5% Average PNM Resources diluted shares outstanding 80.4M 18
TNMP Assumptions 2014 Assumptions amounts shown are before tax 2014 Weather - 1.0% - 3.0% Load 1% = $0.01 O&M increase - Tax rate 36.3% Average PNM Resources diluted shares outstanding 80.4M 19
Corporate and Other Guidance (Ongoing) Corporate and Other EPS ($0.13) – ($0.12) ($0.11) – ($0.09) ($0.16) 2012 2013E 2014E Year-over-Year 2013E – 2014E Key Performance Drivers and Assumptions ∆ EPS Interest $0.02 - $0.03 Tax rate 36.5% Average PNM Resources diluted shares outstanding 80.4M 20
Rate Base Allowed Return Equity Ratio 2014 Average Rate Base PNM Retail and renewables 10% 50% $2B FERC Transmission 10% 50% $170M FERC Generation 9% – 10% 50% $70M TNMP 10.125% 45% $620M Total $2.8B PNM Avg. Rate Base TNMP Avg. Rate Base (In billions) (In millions) $2.5 $2.2 $2.2 $2.1 $720 $690 $620 $520 2013E 2014E 2015E 2016E 2013E 2014E 2015E 2016E Retail FERC Generation FERC Transmission 21
EBITDA and Quarterly Earnings Distribution Guidance (Ongoing) Ongoing EBITDA (In millions) 2013E 2014E Consolidated PNMR $469 - $477 $468 - $486 PNM $345 - $349 $329 - $338 TNMP $121 - $123 $127 - $131 2014 Quarterly Earnings Distribution 45% 26% 16% 13% Q1 2014E Q2 2014E Q3 2014E Q4 2014E 22
Liquidity and Capital Structure No equity issuance planned with current capital expenditure schedule In 2013, PNM, TNMP, and PNM Resources revolving credit facilities were extended to 2018 Targeting cap structure of: 50/50 at PNM and 55/45 at TNMP PNM and TNMP have access to intercompany loans from PNM Resources for additional liquidity of $100M and $50M, respectively PNM Corporate/ Resources PNM TNMP Other Consolidated Liquidity as of November 29, 2013 (in millions) Total Revolver Capacity $400.0 $75.0 $300.0 $775.0 Less short-term debt and LOC balances 3.2 10.3 19.0 32.5 Plus invested cash 4.2 - 1.7 5.9 Total Available Liquidity $401.0 $64.7 $282.7 $748.4 23
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